Tag Archives: the truth about job creation

The first thing to learn is that the “tax cuts under President G. W. Bush did not spur investment.

“Job growth during the Bush years was one-seventh that of the Clinton years. Nixon and Ford did better than Bush on jobs. Wages fell during the last administration (Bush’s last four years in office). Average incomes fell. The number of Americans in poverty, as officially measured, hit a 16-year high last year of 43.6 million, though a National Academy of Sciences study says that the real poverty figure is closer to 51 million. Food banks are swamped. Foreclosure signs are everywhere. Americans and their governments are drowning in debt.” Source:Tax.com

Meanwhile, the GOP and their supporters such as conservative talk radio hosts like Dennis Prager continue to repeat the myth and the lie that increasing taxes on the wealthiest American will cause job losses in the United States.

To discover the truth, one must learn where the wealthiest Americans put their money.

Professor G. William Domhoff of UC Santa Cruz says, “In the United States, wealth is highly concentrated in a relatively few hands. As of 2007, the top 1% of households (the upper class) owned 34.6% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.5%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers)… However, for purposes of studying the wealth distribution, economists define wealth in terms of marketable assets, such as real estate, stocks, and bonds.” Source:Who Rules America?

Since when did investments in real estate, stocks and bonds create jobs? To create a job, a product must be produced and people must buy that product be it dinner at a local restaurant, clothing at a retail store such as Target or Costco, gasoline to fill a car’s tank, buying groceries so families may eat, buying laptops, iPads, flat screen TVs, DVDs, taking vacations, etc.

In fact, capital investment for new and improved products and services that creates jobs mostly comes from the profits of established businesses and large corporations with money to reinvest. Development money represented about 30% of the economy while 70% of the driving force of economic growth comes from consumer spending, which means when retired teachers spend their monthly check from retirement funds such as CalSTRS, they are supporting and creating jobs.

The wealthiest one percent of Americans equals 3.1 million people that control 34.6% of the nation’s privately held wealth, which is mostly invested in real estate, stocks and bonds. The next 19% (59.5 million people) has 50.5% of the wealth. That leaves 250 million people with 15% of the wealth supporting most of the jobs in the United States.

After all, who buys more gasoline, drives more cars, eats more food, takes more medication, wears more clothes, uses more electricity and natural gas for heating and cooling homes, watches more TVs, uses more computers, logs onto the Internet in larger numbers, etc?

SELECT ONE ANSWER

A. The wealthy 1% equaling 3.1 million people

B. The next wealthiest 19% equaling 59.5 million people

C. The 250 million people earning and spending 15% of the total wealth in America

Remember, individuals and families do not become wealthy spending money on consumer items. Wealth is invested and saved and sits somewhere growing more wealth. Most jobs are created by people that spend money on consumer items.

The fact is that retired public and private sector workers do more to support and create jobs than the one percent of America’s wealthiest that gained the most tax breaks under President G. W. Bush and are still benefiting from those tax cuts.

Did you you know that there are more than 27 million small businesses in the US and that between 60 and 80% of all new jobs created in America can be attributed to small businesses. Source: Get Busy Media.com

However, where did the money come from to start those small businesses? It wasn’t from the wealthy with their money invested in real estate, stocks and bonds.

In fact, in an average ten-year period, 71% of small businesses fail (more than 50% fail in the first five years). Knowing that fact, do you believe the wealthy 1% will invest money in such risky ventures, which explains why the wealthy invests their money in real estate, stocks and bonds—not small businesses with a high risk of failure. Source:Small Biz Trends.com

In fact, Peter Delevett writing for Silicon Valley.com reported, “The trends suggest venture firms are increasingly shying away from companies in the “seed” stage of life. During the second quarter of 2010, for instance, the U.S. venture industry’s average seed investment was $6.8 million, according to the National Venture Capital Association. The following quarter, that number had fallen to $3.5 million.”

The Bureau of Labor Statistics says, “Job openings result from the relationship between the population, labor force, and demand for goods and services… In addition, changes in the demand for goods and services influence which industries expand or contract. Industries respond by hiring the workers necessary to produce goods and provide services.”

It is also worth noting “that President Obama and Democrats created more jobs in 2012 than George W. Bush did in his eight year reign of economic malfeasance.” Source:Politicus USA.com

Therefore, it is a myth, a lie, that keeping taxes low for the richest Americans creates jobs. Instead, those that have regular jobs and retired Americans are the ones that support and create jobs by spending most or all of what they earn.

In addition, according to seven recent experiments, “The ‘upper class,’ as defined by the study, were more likely to break the law while driving, take candy from children, lie in negotiation, cheat to increase their odds of winning a prize and endorse unethical behavior at work, researchers reported today in the Proceedings of the National Academy of Sciences. Source:Elizabeth Lopatto writing for Bloomberg

If these seven studies are true, why do we reward the wealthiest one to twenty percent with lower taxes when, at most, they only support 100,000 jobs, which is due to consumer spending—not job creation. In fact, the wealthy tend to hoard money while the rest of us spend it on food, clothing, gasoline, etc.

Lloyd Lofthouse is the award-winning author of The Concubine Saga. When you love a Chinese woman, you marry her family and culture too. This is the love story Sir Robert Hart did not want the world to discover.

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Since I’m a member of the California State Teachers’ Retirement System (CalSTRS), I receive the “Retired Educator,” a quarterly newsletter. The topic of this series of posts was motivated by the 2012 Winter edition.

To earn my monthly CalSTRS check, I first had to work thirty years as a classroom teacher in California’s public schools while 8% of my monthly paychecks went into CalSTRS to help fund that retirement system, which proves that it is not an unearned entitlement as some might want the nation to believe.

In fact, according to the 2011 Summary Report in the newsletter, contributions from members, the State of California and the federal government, which is why we cannot collect Social Security, was almost $6 billion in 2011. About half came from working members.

In addition, I do not earn an annual six-figure income through CalSTRS. In fact, when I left teaching in 2005, I took a 40% pay cut, as most teachers do, and lost my medical plan, because I could not afford the cost of COBRA, which was more than $1,000 a month. Add another 14 years working outside education, and the total number of years I worked for a pay check was forty-five.

I discovered from that “Retired Educator” newsletter that CalSTRS lost $53.95 billion between 2007 – 2009 while President G. W. Bush still lived in the White House, but earned back $36.92 billion (2009 – 2011) with President Obama. Note: CalSTRS did not receive bail out money from the federal government. That money mostly went to big private sector banks—not retirement programs such as CalSTRS. If you want to know where the money went and how much, CNN.com shows you.

I’ve read that total losses globally were in the trillions. One financial Website set the total at more than $60 trillion US dollars. In China, alone, about 20 million people lost manufacturing jobs leading to labor unrest in 2008 and 2009. In the US, that number of job losses was about nine million.

Even though the CalSTRS newsletter didn’t say so, I learned that the wealthy do not create most jobs as Republicans claim—the working class creates most jobs by spending what little they earn, while the wealthy hoard most of their money in safer investments than those needed to create jobs as you shall learn from this series of posts.

However, I have an old friend that keeps telling me we cannot raise taxes on the wealthy one percent and/or the top twenty percent (those earning $55,000 or more annually—6.24% earn more than $100,000), because it will stop job growth. He also happens to be a neoconservative-libertarian, evangelical Christian. He despises liberal and progressive politics and policies. He has said more than once that he believes G. W. Bush may have been America’s greatest president, and if anything bad happens in America, it is the fault of those evil liberal-progressive Democrats.

It doesn’t matter what the facts reveal. Anything that does not match his opinions/beliefs are liberal lies. He also listens faithfully to the conservative Dennis Prager radio talk show and belongs to and attends Dennis Prager Fan Club meetings.

Conservative talk radio in the United States is a phenomenon that got its start in the 1980s when the Fairness Doctrine was allowed to expire under President Reagan (he vetoed it after both Houses of Congress voted it into law). This veto then allowed broadcasters to present a political opinion or point of view or pundit (mostly lies, exaggerations and misinformation) without being required to allow equal time for alternative views or rebuttals. The ideology that benefited the most from the loss of the Fairness Doctrine was conservative talk radio shows such as Dennis Prager’s. See Prager’s Parrots to learn more.

My old friend and Prager fan has also said that he wouldn’t mind if Social Security were repealed as long as the government refunded him the money he paid into the system—and this comes from a guy that lost a half million dollars in the stock market after saving that money in tax sheltered retirement accounts. Later, he had to do battle with the IRS for years because they came for their share of that tax-sheltered money that he borrowed from his tax shelter and gambled away.

No matter what this old friend believes and preaches as if it were one of the Gospels, I’ve learned that what put America on the road to ruin causing the 2007-2011 global financial crises has more to do with the Gramm-Leach-Bliley Act repealing the Glass-Steagall Act of 1933 (this was the final nail in the coffin), whichderegulated banking, insurance, securities, and the financial services industry, allowing financial institutions to “grow very big”.

The repeal of the Glass–Steagall Act of 1933 effectively removed the separation that previously existed between investment banking, which issued securities, and commercial banks, which made money through deposits.

The deregulation also removed conflict-of-interest rules that had prevented investment bankers from serving as officers of commercial banks.

It was the repeal of these prohibitions that was later claimed by many to have contributed to the 2007 global financial crises by allowing depositors’ money to flow into risky investments, and according to the Huffington Post, in the first 15 months after the start of the 2007 global financial crises, American Retirement Accounts Lost $2 Trillion and the federal government did nothing to slow the tide of those losses as they bailed out banks and the auto industry. By the middle of 2009, those losses may have climbed as high as $4 trillion, which is much more than the $54 billion CalSTRS lost.

Lloyd Lofthouse is the award-winning author of The Concubine Saga. When you love a Chinese woman, you marry her family and culture too. This is the love story Sir Robert Hart did not want the world to discover.

To subscribe to “Crazy Normal”, look for the “E-mail Subscription” link in the top-right column.